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Unless you have a ton of cash at your disposal, you’ll probably need credit at some point in your life. Whether you’re buying a home, car or big-ticket luxury item, the first thing that most lenders typically look at is your credit score.
If you have limited or no credit history, you’ll need to begin building your credit and boost your score before you apply for a major loan. Unfortunately, many believe that opening and using a credit card is the only way to go.
Here are a few alternatives to help raise your credit scores without the magic plastic:
1. Ask companies to report on your behalf
Do you have any recurring bills that you pay on a monthly basis, such as rent, utilities, cable or a cellphone? Try giving the providers a call and request that they report your account activity to the three major credit bureaus, TransUnion, Experian and Equifax.
Do this only if you have responsible payment habits, as payment history accounts for 35 percent of your credit scores and can have a significant impact if there is not a lot of other data in your credit reports.
Also, bear in mind that these companies are not obligated to report to the bureaus, and your request is simply a favor that they have the right to deny.
2. Become an authorized user on another credit card
Of course, there are pros and cons to becoming an authorized user. If the cardholder has a strong credit background, two thumbs up for you because signing on as an authorized user will enable their stellar behavior to improve your credit profile somewhat (perhaps not as much as you think). But, if things are the other way around, your credit scores could take a hit.
Either way, if you opt in and have a change of heart, the information will quickly vanish from your credit file when you request to be removed from the account.
3. Open an account with a credit union and take out a small personal loan
Some credit unions have restricted membership and limited accessibility, but credit unions generally offer financing options at lower interest rates than traditional banks. To give your credit score a boost, apply for a small personal loan.
If your request is denied, inquire about a secured loan in which your money, say, a certificate of deposit or savings account, will be used as collateral. The request will more than likely be approved because the risk to the institution is minimal. And you may have to pay a tad bit of interest, but the rate usually beats what’s available in the credit card world.